Recently, Paula Christine was talking to her daughter about an uncomfortable topic - what would happen to her daughter's kids if she weren't around?
Attorney Shannon DeWall rejoins us today to talk about the documents you need to protect your children should you pass away or even become incapacitated. They include a will, a standalone document for guardianship in the event of disability, and (in many cases) a trust. Minors cannot inherit money, but that money can go into a trust to provide for them.
Shannon also advises against making the trustee and the guardian the same person. This can provide some valuable checks and balances to protect the children.
Paula makes a good point in today's episode - if you don't stipulate a guardian for your children, that can end up in probate, and the kids could go with someone you don't even like! Also, what if you're still alive, but incapacitated? You need to prepare for that possibility as well.
We do break down the case of divorced parents. Often, the surviving parent would get custody. But if the parent who passed away had full custody previously, that may not be the case.
For more information on this topic, you can reach Shannon at Shannon@Dewall-law.com or at 734-772-1220. Her website is: https://dewall-law.com/
Need help with your financial future? Learn more about Paula and her work at PaulaChristine.com or send her an email: Paula@PaualChristine.com
Paula: Welcome to Beyond the Paycheck. I'm Paula Christine. Our guest today is Shannon Dewall. She is an estate planning attorney that I work with quite a bit, and I was talking to my daughter the other day if she's single, but what happens to her children if she was to pass away? What would that look like?
Where the children were gonna go? One would go to their father, who's very much active in his life, but the other one who isn't. What would happen with that child? So I thought, that would be a great topic because it's very important to have the proper documents in place, especially for parents to take care of their children at their death. So welcome Shannon.
Shannon: Hi. Thanks for having me.
Paula: Okay, so this is an interesting topic because I have some children who it's very obvious that the child will go to the other parent, but in my daughter's situation, because that father is not active in his life at all, what happens in that situation?
Shannon: Yeah. So for minor children, younger than 18, there has to be a guardian. And so when I do estate planning for clients that is one of the things we talk about for minor children is who would you choose to be their guardian if you couldn't do it? There are some forms that I provide for my clients if they know who they want to name.
Typically, there's two places you'd wanna do that. One would be in the will, and then the other place I usually do it is a standalone document because what if the parent didn't pass away, but they became incapacitated in some way, and they weren't able to care for their children. So we have a standalone document that could be submitted to the court along with the appointed guardian's acceptance. And that usually is all that's needed.
Paula: So does the Guardian have to accept or is that something they do at the death?
Shannon: That's something they do at the death and when they're ready to accept that position. And that acceptance is a court document that gets filed.
Paula: Okay, so you would do a will and then that other document. I never thought about disability, but.
Shannon: Yeah. So the will only gets probated after you pass away. So there's a statute that says you can either appoint that person in a will or if you die, or a standalone document if you don't die, but you still need a guardian. We do both.
Paula: So do you have a guardian for the financial part of it and a guardian that has the actual custody or are they one and the same?
Shannon: Yeah, they're the same. You're just naming one, one role, as guardian. Now guardians can be full guardian or they can be limited guardian. But typically if you're talking about a death or someone's unable to take care of their children anymore, we're talking about full guardianship.
Paula: Okay. What happens if you die without those documents?
Shannon: Then someone needs to come forward. Whoever wants to be the guardian and they would petition the court, or really any interested party can petition the court and appoint, or suggest who the guardian should be, and the guardian, of course, they're willing would come forward and accept that position.
Paula: So it could be anybody.
Shannon: Yeah, it, the standard is whoever is the child's welfare and best interest in mind. So it's typically a family member, in some circumstances we may not have any family members. So it could be anyone who's suitable.
Paula: But it could be someone you don't like.
Shannon: When you say you don't like, do you mean like the parent who's passed away or who's not able to care?
Paula: Yes.
Shannon: Yeah, it could be. That's why it's so important. If you have someone in mind, you wanna name that person. I always recommend, of course, that they talk to that person ahead of time, to make sure that the other person's willing to act as guardian. So we try to do all of those conversations and, make a plan for that.
But yes, if you don't have that plan, Parents pass away unexpectedly. It could be whoever can do it or whoever's able to do it. And it may not be the person you wanted.
Paula: What if there was like two grandparents , two separate grandparents that decided that they both wanted to have guardianship?
How does the court determine who ends up getting the guardianship?
Shannon: During the hearing, the court will ask questions of each side to see who's more suitable. Things like, does anybody have a criminal history? Or who's spent more time with the child, who has a better suited, living arrangement and those kinds of things.
Now if the child is 14 or older, the child gets to say, and the judge will listen to what the child wants to do.
Paula: That's a funny age 14. Why not eight?
Shannon: Yeah, I'm not really sure why they picked that age, but that's the age, at least in Michigan, I should say.
Paula: So let's go back to the question about a parent that's nonexistent. Like I know several people throughout my lifetime that the father has basically disappeared. And they still have rights. I understand, because they've never given that up, but if the child doesn't even know them, can they come back and petition because they're biologically the parent?
Shannon: Yeah. If they still have parental rights, they can. If you have a situation where one parent has full custody, sole custody, and the other parent, their parental rights are suspended. Then the petitioner doesn't have to get consent from the other parent whose rights are suspended. So it really has a lot to do with who, if a parent has sole custody or if they have joint custody, then you do have to get consent from that other parent.
So I don't do family law, but one of the strategies in divorce proceedings and things is to, is you want to advocate for, joint custody so that you don't have this exact situation where the parent with sole custody gets to decide these things.
Paula: Yeah. But if it's a non-existent parent and hasn't been in the kid's life for, 10 years, how can they have rights to that child?
Shannon: One would assume if they've been non-existent for 10 years, they probably don't have any custody. Probably the other parent just has sole custody. If someone's been gone for 10 years, it's unlikely they still have joint custody. But of course that's things that the judge will look at if, of course two people are petitioning for guardianship and you have one choice has been in the child's life and as a grandparent or something, and the other choice hasn't seen their child for 10 years. The judge is gonna wanna ask some questions about that.
Paula: It might not necessarily be cut and dry. So what other things should a parent do to protect their children?
Shannon: So I do mainly estate planning. So other things that I think about in the situation would be like a trust. So if parents passed away, the trust could hold property for the minor children until they were older.
Then the question becomes, do you want the guardian to also be the trustee and have access to that money, or do you wanna name someone else to be trustee? And so I usually recommend someone else just so there's checks and balances so that the guardian would be able to ask a trustee if they needed funds from the trust to care for the children.
That way the trustee can make a discretionary distribution if they needed to for the children's wellbeing.
Paula: So they should have a will, a standalone document.
Shannon: Yeah, a will naming who they would want to be a guardian. A standalone document for disability. And then a trust to hold assets for the children until they're older.
Paula: Lots of times people put their minor children as beneficiaries on their accounts. , and technically someone under the age of 18 can't really inherit. So the trust would then solve that issue.
Shannon: I recommend making the trust the beneficiary instead. And then that way the trust can hold whatever that account is until the children are old enough to receive it themselves.
And then during that time, while the children are minors, the trustee who's like the manager of the trust, they don't own the things in the trust, but they manage it for the children. And then they would have the authority to access those funds, for the children.
Paula: Okay. So really they need three documents just to make sure that they're protected on all sides.
Shannon: And I'll just say that's not the only documents that we do in an estate plan, but yeah we're just talking about this issue. It would be those documents that you would wanna use to take care of a minor child.
Paula: Yeah. And I'm gonna be honest, I didn't have any of that in place.
Shannon: A lot of people don't. A lot of people don't.
Paula: I had minor children and I knew I should, but yeah, I'll take that back. I think when my youngest, I think probably about 15, 20 years ago, we did put a trust together to make sure that everybody was taken care of. You're right, I did do that. But with my older children, it was not in place.
But their father was very active in their life anyway. So naturally they would've went to him. And it's not likely we both would've died at the same time since we weren't really ever around each other. So I guess there wasn't really that much a need for me to have that done.
Other than that if I'd died though, my assets wouldn't have gone probably to the right place.
Shannon: Yeah. And you mentioned passing away together. Something we think about is maybe like on vacation or if you're traveling together and leave the children behind there is a separate document. you can use for something like that, which is a delegation of parental rights.
And that can just be a temporary thing that you use to say, we're going out of town, leaving the kids with so-and-so, and you're gonna give them temporary delegation. That way, if the child has an accident or something, they can take them to the hospital and then they've got, the authority from that document to be able to make some of the decisions while you're out of town. So I'll just mention that too.
Paula: Huh. That's great. Because a lot of parents do travel without their children. I always, I don't know if this was proper, but I always had a letter signed from me just saying that I was on vacation and if anything happens, whoever was watching my kids had the authority to make medical decisions for them.
And I had it notarized, so I don't know if that was proper or not, but that's what I did back in the day. Now that was a long time ago. Yeah. Yeah. But back in the day, that's what I did. Yep. Because I didn't know any better.
Shannon: Yeah, that's all right. A lot of times something like that might work, but there's an actual form for it if you were gonna do that nowadays.
Paula: Yeah. Don't have to worry about that nowadays.
Shannon: No. Not me either.
Paula: I also learned recently too, that on your accounts, you can actually set up, you know how it's usually primary contingent , and then you can actually do, and I'm not sure how to say the word , but do a third beneficiary or second contingent kind of a thing.
It's tradit, traditionary or something like, I don't know if that's the way you say the word.
Jon: Paula, are you're thinking of tertiary in, in the case of if something happens to both, you've got a backup to the backup.
Yeah. You're right. That is the correct word.
Paula: I didn't really know that document cuz most people that I'm used to working with are older. And don't normally travel in the same playing with their children. But in the circumstances they were. And they were concerned because there was number one, there was no grandchildren. and if the whole family was to pass away, where would the money go to and whose estate would it end up in
I didn't know that existed, but something people should think about if you're traveling with your whole family.
Shannon: Yeah, absolutely. And I usually have people put almost every account as the, either the primary or the contingent into their trust. Which in a trust doesn't die. So that kind of, helps too.
Paula: But that brings on a different subject and we're not gonna talk about that today. But it's not really best interest for IRA to go to a trust.
Shannon: No. No, it is not. No, not for IRAs, not for pre-tax money.
Paula: So that's a whole other topic, because I have to have that conversation all the time with people.
It's like my attorney said, the IRA should go to the trust. And I'm like, please don't do that. It's such a nightmare.
Shannon: Oh yeah. Not this attorney!
Paula: Whole different subject. So we won't get into that. So I appreciate you sharing that with me because remember I was having the conversation with my daughter.
That's what we were concerned about what would happen. Her son's father is really nonexistent in his life anymore, and we were concerned about what would happen there. So it gives us a little bit more comfort. , know that she's gonna have to reach out to someone like yourself and have proper documents put in into place.
So I appreciate you sharing that with us. Yeah, sure. So how can anybody get ahold of you, Shannon?
Shannon: You can call my office directly. It's 734-772-1220. And I also have a website too, which is Dewall-law.com.
Paula: Perfect. I really appreciate your knowledge. If anybody would like to get a hold of me, you can reach me at paula@paulachristine.com
or you can check out my website paulachristine.com.